July 18 (Bloomberg) -- St. Jude Medical Inc., a maker of
heart rhythm devices, fell the most in five weeks after the
company said its 2012 outlook is worsening as a product recall
crimps sales and a stronger dollar erodes overseas profit.

St. Jude decreased 3.8 percent to $37.75 at the close in
New York, the biggest single-day drop since June 12. The company
cut its forecast for full-year profit to $3.40 to $3.45 a share,
St. Jude said today in a statement. The device maker in April
estimated $3.44 to $3.49 a share.

Last year’s recall of Riata, a wire used to connect life-saving defibrillators to the heart, may have hurt sales of other
products. The wires, or leads, had to be replaced after reports
they could break through the insulation coating and fail. Sales
of St. Jude devices that manage heart rhythms, including
implantable cardioverter defibrillators and pacemakers, fell 6
percent in the second quarter from a year earlier.

“There was a risk that they were going to have to lower
guidance because of the currency, the bigger concern is they
sounded considerably negative about the cardiac rhythm
management market,” Michael Matson, an analyst at Mizuho
Securities USA Inc., said in a telephone interview. There is
concern the recall is “starting to catch up with them,” he
said.

St. Jude stopped selling Riata in December 2010 and
recalled it a year later. Durata replaced Riata and was
associated with one fraying incident in a report to U.S.
regulators last month.

Penalty Box

Sales of St. Jude’s implantable cardioverter defibrillators
fell 4 percent in the second quarter to $459 million, according
to the statement. Pacemaker sales decreased 9 percent to $287
million.

“Their sales aren’t falling off a cliff, but they’re
clearly in the penalty box,” Joanne Wuensch, an analyst at BMO
Capital Markets Corp. in New York, said in a phone interview.

For St. Jude, which gets about 52 percent of its revenue
from outside the U.S., the dollar’s strength against other
currencies has also reduced the value of some sales. Second-quarter revenue fell 2 percent to $1.4 billion. Without the
negative effect of currency translation, the company said sales
would have risen 1 percent.

The U.S. dollar index, which reflects the value of the
dollar against major world currencies, was on average 8.1
percent higher in the second quarter than a year earlier.